Rulings Disagree: Is Loss of Use of a Leasehold 'Property Damage'?

On this basis the court held that the tenant’s action did not raise a po-tential claim for “loss of use of tan-gible property” arising out of the tenant’s inability to use the restau-rant premises. See also Scottsdale Ins. Co. v. Darke, 424 F.Supp.3d 638 (N.D. Cal. 2019) (citing Con-way with approval on this point). But the court in Conway nev-ertheless found coverage for the tenant’s suit on the theory that the tenant’s suit involved a potential claim for loss of use of the tenant’s own property, including equip-ment, fixtures, tables and chairs, in the operation of the restaurant. In so holding the court cited Riverbank Holding Co., LLC v. N. H. Ins. Co., 2012 WL 2119046, at * 8 (E.D. Cal. 2012) for the proposition that a loss of use of a tenant improve-ment does meet the requirement of “loss of use of tangible property,” thereby triggering coverage under the CGL policy. It is difficult to reconcile Thee Sombrero with Conway and Darke and authoritative guidance will have to await a decision from the California Supreme Court. In the meantime, the debate on this point between policyholders and insur-ance carriers will continue. By Peter S. SelvinTHURSDAY, OCTOBER 1, 2020www.dailyjournal.comLOS ANGELES & SAN FRANCISCORulings disagree: Is loss of use of a leasehold ‘property damage’?Is a party’s loss of use of a lease-hold or other interest in real property considered “property damage” within the meaning of a comprehensive general liability policy? Two recent cases go in dif-ferent directions on this point.The starting point is the CGL’s Coverage A, which typically pro-vides coverage for “bodily injury and property damage liability.” In turn, “property damage” is typical-ly defined to include the “loss of use of tangible property that is not physically injured.” The key ques-tion addressed by the following cases is whether a party’s leasehold or other interest in real property constitutes “tangible property.”In Thee Sombrero v. Scottsdale Insurance Company, 28 Cal. App. 5th 729 (2018), there was a fatal shooting at a nightclub which re-sulted in the revocation of a con-ditional-use permit to operate the premises as a nightclub. That con-ditional-use permit was replaced with a modified permit which pro-vided that the property could be op-erated only as a banquet hall.In the underlying liability action, the nightclub owner had brought suit against its former security company for negligence. In that suit, the nightclub owner asserted that the security...